Messari analyzes the performance of DEX in the first quarter: PancakeSwap is rising, SushiSwap is sluggish

DEX trading volume has seen a parabolic growth in the first quarter of 2021. DEX transaction volume reached more than US$217 billion this quarter, an increase of 236% over the fourth quarter of 2020, and an increase of 8012% over the first quarter of 2020. The bull market vigorously boosted the development of the exchange.


In the first quarter, the top student was PancakeSwap, and the former top student Sushiswap grew sluggishly. Bancor, the originator of AMM, finally gained traction, and the cross-chain trading rookie Thorchain is gaining momentum… Let’s take a look at the players in the DEX industry this quarter. The performance and the next innovation worth looking forward to.

The rise of PancakeSwap

The biggest winner of the quarter was PancakeSwap on Binance Smart Chain (BSC), which also reflected the prosperity of BSC in the first quarter. PancakeSwap’s market share increased from 2% to 37% in the first quarter, and the growth mainly occurred after mid-February.


The rise of PancakeSwap is because more and more retail investors who are not so sensitive to security issues are leaving the expensive Ethereum and turning to BSC. Although many people dispute the degree of centralization of BSC (21 verification nodes) and whether PancakeSwap should be classified as a DEX, its appeal to the market is beyond doubt. The BSC project does a good job in terms of user-friendliness and low transaction fees. However, once the Ethereum Layer 2 solution has landed and gained traction, it remains to be seen how these agreements will compete. But from the current situation, before BSC encounters scalability challenges (congestion, high costs), BSC and PancakeSwap will continue to exist in the foreseeable future.

Sushi is sluggish?

SushiSwap achieves growth through its Onsen liquidity mining program-Onsen provides SUSHI incentives to help new projects guide liquidity. Until March, SushiSwap has been one of the best performing players in the large DEX. However, as the transaction volume drops, the release unlocks approaching (from the initial liquidity mining plan) and the sudden emergence of competitors, SUSHI is beginning to lose Rising momentum. SushiSwap has a market share of up to 24% in the Ethereum DEX, and its transaction volume ratio in the first quarter (compared to January) finally fell by 2.4% to 14.6%.


However, Sushi’s market sentiment is still positive, with some new products expected to be launched in the next few months to expand product coverage, including:

  • Deriswap–Incorporate transactions, lending, futures and options into the same agreement;
  • BentoBox-a single vault that holds all assets deposited by users and makes them available for use by any application based on it.
  • Kashi-Lending and margin trading platform built using BentoBox
  • Miso-token issuance platform;
  • Natto-NFT trading platform and issuance platform;
  • Mirin (SushiSwap V3)-Customizable fees, rewards and curves, franchised liquidity pools, impermanent loss protection and unilateral LP


SushiSwap is trying to develop from a single AMM to a more diversified financial institution. Time will tell us whether the expansion of these products is successful, or what Peter Lynch calls diworsification (the company has over-expanded and entered new growth projects and businesses that they do not fully understand, and is inconsistent with the company’s core competitiveness).

Bancor is finally working

Although Bancor was the first automated market maker (AMM) built on Ethereum, it has not been able to generate obvious appeal to the market, and Uniswap eventually became the industry leader.

Even in the DeFi summer of 2020, Bancor’s transaction volume is still very low, and its market share is almost invisible on the chart. However, since the launch of version V2.1, Bancor’s fortunes have finally begun to change, and liquidity and trading volume have achieved explosive growth in the following months.


The core of Bancor v2.1 is unilateral liquidity, which is paired with the tokens deposited in the fund pool by minting new BNT. Essentially, the Bancor agreement and unilateral liquidity providers make market together. The agreement earns half of the transaction fees of the capital pool. When unilateral liquidity is removed from the capital pool, the minted BNT is burned along with the transaction fees earned by Bancor.

Whether Bancor will continue to grow in the next few quarters remains to be seen.

THORChain mainnet

After more than two years of development and multiple delays, THORChain was officially launched within a few days after the end of the first quarter. The cross-chain liquidity protocol can realize the decentralized exchange of assets between different blockchains.

Before the launch of THORChain, DEX users’ transactions were either restricted to native assets of the same blockchain, or were conducted in the form of anchored assets (usually under custody). And THORChain brings decentralized liquidity to multiple blockchains, including Ethereum and Bitcoin, Binance Chain, Litecoin, Bitcoin Cash, etc., which may include more in the future.


When THORChain starts, it sets an upper limit on the deposits of the liquidity pool to ensure stable operation before opening. Will THORChain be widely adopted? Will users continue to happily use those wrapped assets on Ethereum and BSC? Time will tell us the answer. The good news is that because of the new solution, users may no longer need to use a centralized exchange for cross-chain transactions.

AMMs new action

In the first quarter of 2021, the leading AMMs on Ethereum announced their next major upgrade. In January, SushiSwap announced Deriswap and Mirin; in February, Balancer announced Balancer V2; in March, Uniswap announced Uniswap V3. The common theme of the upgrade is the improvement of capital efficiency. The following is a brief summary of each upgrade.


In November 2020, Yearn founder Andre Cronje shared the details of a new agreement called Deriswap: AMM that combines trading, lending, futures and options into the same agreement. After Yearn merged with Sushi, Deriswap became the basis for SushiSwap’s next upgrade. The upgrade of SushiSwap V3 (named Mirin) will also bring customized fees, rewards, LP curves, franchised liquidity pools, as well as new solutions for impermanent loss protection and unilateral LP solutions developed by AC.


Balancer V2, announced in February and launched in April, introduced a single vault to hold assets deposited in various pools. This not only reduces the gas cost of transactions across multiple pools (the pain point of Balancer V1), but it also allows Balancer to improve capital efficiency through “asset managers”-approved smart contracts that will be able to access the entire vault And its underlying assets. The first asset manager of V2 will allocate idle assets in the Balancer fund pool to Aave to gain income.



The core of Uniswap V3 is centralized liquidity-liquidity providers (LPs) can make markets within a customized price range, creating a specific price curve in the process. According to the official statement, this design can increase the capital efficiency of LP by 4,000 times. LP can provide the same depth of liquidity as V2 within the specified price range, while the idle capital is greatly reduced. In addition, by combining different concentrated positions, LP can approximate any order book or AMM form. Centralized liquidity will also give Uniswap the ability to conduct PK with Curve-allowing LPs to provide stablecoin liquidity within a strictly set price range.


The competition for DEX on Ethereum will become more intense in the coming months. The purpose is to improve capital efficiency, but the methods vary. No matter who wins, users will be able to experience deeper and better liquidity.

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